JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the
book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000
and paid dividends of $30,000. On January 1, 2019, JLB purchased an additional 25% of REB
for $120,000. Any excess of cost over book value was attributable to goodwill (No amortization).
On that same date, JLB changed to the equity method. During 2019, REB reported net income
of $120,000 and paid dividends of $45,000.
a. What investment income did JLB record from REB in 2018?
b. What investment income did JLB record from REB in 2019?
c. What journal entry was made on Jan 1 2019 as switch equity method?
d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the
amount paid for 25% of REB from JLB to calculate the implied fair value of the original
15% of the investment)
